TAKEOVER target Woolworths saw annual profits increase yesterday but warned that sales and margins were currently being hurt by tough trading conditions.

Woolworths said profits rose 4.7% to £73.1m in the year to January 29. Even though like-for-like sales at its main high street chain fell 1.3% last year, it managed to improve profitability.

Investors expect private equity firm Apax to press ahead with a bid for the chain. Apax had previously offered between 50p and 55p per share before stepping in with a revised proposal of 58.2p.

Evolution Securities analyst Nick Bubb rated the likelihood of Apax pressing ahead with a takeover at 80% because of the attraction of Woolworths' entertainment and books distribution business, which grew sales by 10% to £1.2bn last year.